Competitive federalism means that regional or local governments compete
with other regional or local governments.

People choose which regional or local government to live
under. The governments compete for citizens. Investors choose which
regional or local government to invest in. The governments compete for
investment.

Economies which are based on competition between businesses are more
successful than economies which are not based on competition between
businesses. Competition between governments is good for the same reasons
that competition between businesses is good.

Some socialists say that competition is the opposite of cooperation. This
is wrong. The opposite of cooperation is conflict. Competition is a mix of
cooperation and conflict. Competition requires
rules. Competitors confict with each other within the rules, but cooperate
in enforcing the rules.

The central government makes and enforces the rules of competitive
federalism.

Some people think that competitive federalism means that the central
government competes with the regional and local governments for control of
government policy. I think that the central government
should not compete with the regional and local governments because the
central government cannot make or enforce the rules of the competition
fairly if the central government is a competitor.